Get a GRIP?

bonnyrigger

Quick check of plans for possible retirement at 62 (currently 60):

My main pot is in Royal London GRIP 5 - started in May 2017, perf to date (and I mean today!) 25.89% or 4.66%/yr, it's down 2.58% from May this year but so are a lot of other funds. Fund is currently at £322k, no TFLS as we have used that for house imps  etc.

I have a live LGPS (post 2015 only) pension worth today £5574.00/yr, at 67, this can be taken early of course with normal reductions, projecting this to be about £7600/yr at 62, AVCs currently £10.5k expect to be £18k at 62, these can be taken tax-free when main LGPS pension is taken.

Full state pension at 67.

I'd like a gross pension of £22k/yr at 62, rising with CPI, funded initially by the RL pension then by RL/LGPS/State, when I "activate" LGPS is the variable bit.

Currently have an IFA taking 0.7% AMC, RL 0.4%.

Thoughts:

1. Stay with RL GRIP 5 and stick it into drawdown at 62, ditch IFA at this point.
2. Transfer all to SIPP when I turn 62 with similar risk level, stick it into drawdown, ditch IFA.

Does this sound feasible or am I being overly optimistic on the sustainability of that level of income (£22k, CPI linked)?

Albermarle

I have a live LGPS (post 2015 only) pension worth today £5574.00/yr, at 67, this can be taken early of course with normal reductions, projecting this to be about £7600/yr at 62,

If your pension today is worth £5574 at age 67, why would it be worth £2000 more at age 67, in two years time? Normally you would only expect it to increase by whatever inflationary factors are used?

1  Stay with RL GRIP 5 and stick it into drawdown at 62, ditch IFA at this point.
2. Transfer all to SIPP when I turn 62 with similar risk level, stick it into drawdown, ditch IFA.

Normally RL prefer/insist to work via financial advisors, so option 1 may not be possible.

A SIPP does not have a risk level, it is the investments you hold within it.

Can you explain the logic behind not having an option of keeping the IFA. Normally the services of an IFA would be more useful in drawdown than before. I am not saying whether you should have an IFA or not, only why have one in the accumulation phase, and not in the drawdown phase. If anything. I think it is usually the other way round.

bonnyrigger

Thanks for answering, the reason the LGPS pension is worth more is because it's live, i.e. I'm still contributing to it for another 18 months + it's getting a 10.1% increase in March. 

Yes. I did realise that a SIPP is just a container, so the fund(s) in it would have to be similar to GRIP 5.

RL - what they prefer and what they'll accept are maybe 2 different things.

I'm not fixed on ditching the IFA but had assumed once you were in drawdown (i.e. retired) you'd have more time to sort/change things yourself.

Linton

A crude calculation firstly working in today's prices.....

5 years 62-67entirely funded from RL: 5X22K=£110K
30 years 67-97 funded from SP (£10K), LGPS (£5.6K) RL (30X £6.4K=£192K)

Total RL required=£302K.  Current total RL+AVCs=£340K

Assuming SP and LGPS increase with inflation, if RL also increases on average with inflation you should just be OK.  It is reasonable to assume that unless you invest too cautiously you will average a few % return above inflation.  At some stage you could consider Equity Release if your funds are running low.

Some points:
 - You have not stated that you have a spouse so I assume not.  If you do you really need a combined plan.
 - Are you sure £22K/year gross is sufficient?
 - What about 1-offs?
 - Will you have the investment experience to invest £300K+ not too cautiously but at not too high a risk also?

Albermarle

bonnyrigger said:

Thanks for answering, the reason the LGPS pension is worth more is because it's live, i.e. I'm still contributing to it for another 18 months + it's getting a 10.1% increase in March. OK makes sense

Yes. I did realise that a SIPP is just a container, so the fund(s) in it would have to be similar to GRIP 5.

RL - what they prefer and what they'll accept are maybe 2 different things. I think the issue is by dealing with IFA's they save a lot of money, and no need to have a big office answering lots of questions from the public. So they will have a policy on it, that they will probably not change for one person

I'm not fixed on ditching the IFA but had assumed once you were in drawdown (i.e. retired) you'd have more time to sort/change things yourself. It is true you will have more time, but you need the inclination and some knowledge as well. A lot of posters on here seem to manage their own pensions reasonably successfully, so it is certainly possible
The issue really is that if make a mess of it when you are still  earning, you have time to rectify the situation, but when you are retired, it is more critical.

See above in bold

bonnyrigger

Thanks Linton, the other half has £18k DB + about £50k in works DC + full SP at 67, DB pension in full at 65 (currently 57) - didn't want to complicate things.
So between us we should be about £40k/yr - think that's OK, she isn't retiring at the same time as me - that's up for discussion!
As you guessed no mortgage, and an option to downsize a bit if required.
Investment experience - not a massive amount - but was assuming I'd be picking an off-the shelf product or sticking with the existing one.
I've got 18 months to think about  the IFA situation.

mcc100

Just to clarify, as I speak from experience, an IFA is only needed for the initial set up of the RL Pension. Once the Pension is up and running their services can be stopped at any time.

dunstonh

1. Stay with RL GRIP 5 and stick it into drawdown at 62, ditch IFA at this point.

RL have done very well on the lower risk end assets within their governed portfolio this year.

2. Transfer all to SIPP when I turn 62 with similar risk level, stick it into drawdown, ditch IFA.

What will changing to a SIPP achieve?

Does this sound feasible or am I being overly optimistic on the sustainability of that level of income (£22k, CPI linked)?

You haven't outlined  a plan with reasons.   You have just said, should you switch from a low cost PPP to a SIPP with no details. 
 
The RL charging structure, mutual bonus and fund selection with GRIP5 are all knowns.  The SIPP is a complete unknown.  Hence, why we cant compare

I'm not fixed on ditching the IFA but had assumed once you were in drawdown (i.e. retired) you'd have more time to sort/change things yourself.

You can do it yourself or you can get the IFA to do it.  No different to most jobs in life where you use a professional or DIY.
What method of drawdown are you planning to use?   Would you segment the portfolio for time weightings or run a cash account?  Would you prefer yield or total return?

Yes. I did realise that a SIPP is just a container, so the fund(s) in it would have to be similar to GRIP 5.

The RL GP/GRIP portfolios are a portfolio of single sector funds.   You can build your own portfolio.  RL run monthly governance on theirs.

Albermarle

mcc100 said:

Just to clarify, as I speak from experience, an IFA is only needed for the initial set up of the RL Pension. Once the Pension is up and running their services can be stopped at any time.

What about when you change from accumulation to drawdown? Some providers see this as another point where financial advice is necessary. Prudential for example. Aviva's policy also seems a bit unclear.

dunstonh

Albermarle said:

mcc100 said:

Just to clarify, as I speak from experience, an IFA is only needed for the initial set up of the RL Pension. Once the Pension is up and running their services can be stopped at any time.

What about when you change from accumulation to drawdown? Some providers see this as another point where financial advice is necessary. Prudential for example. Aviva's policy also seems a bit unclear.

RL will do it direct to consumer going through the usual lines of defence method.  They wont provide any advice on what method is best or it alternatives could be better.  It is instruction only with risk warnings given.

bonnyrigger

Yes, I can see that RL re-balance monthly in the account. 
The only reason to move to a SIPP was if there would be lower fees.
I hadn't got as far as working out how to actually run the drawdown, perhaps a bit naive - looks like plenty of research to do in next 18 months.